For a period in his childhood, Daniel Kahneman lived like a hunted animal. When the Nazis occupied France he and his family fled into hiding. In search of Jews, the SS prowled the streets, stripping men and boys naked to see if they were circumcised.

Bundled up at night in different spots – camping in a chicken coop; posing as a poor Christian family in the countryside – Kahneman prayed to God. “And the prayer was: I know you are very busy and that this is a tough time and all that,” he recalls, “I don’t want to ask for much, but I want to ask for one more day.”

His father died of untreated diabetes in 1944 – it was too risky to expose himself by seeking medical help. But Kahneman, his sister and his mother lived to see one more day. Then another. And another. As Michael Lewis makes clear in his new blockbuster book The Undoing Project, the world is a better place for it.

Now in his 80s, Kahneman became a Nobel prize-winning psychologist who transformed the way we think about the human mind. He is a best-selling author in his own right. Thinking, Fast and Slow, which tracks his work on cognitive biases, has sold more than a million copies since 2011.

Yet this is not just Kahneman’s tale. With his characteristic eye for pinpointing gripping narratives in arcane subject matter, Lewis concentrates on Kahneman’s brilliant, sometimes stormy, always revealing, relationship with another genius, Amos Tversky. Starting in the late 1960s the two men, both members of the psychology department at the Hebrew University of Jerusalem, produced a series of seminal papers, forging the field of behavioural economics.

Lewis came across the pair in the aftermath of his 2003 mega-hit Moneyball: The Art of Winning an Unfair Game. That book, later made into a movie starring Brad Pitt, tracked how a failing Oakland Athletics baseball team prioritised data over the intuition of scouts in assembling its players. Two academics writing in the New Republic pointed out that Lewis had missed the crux: that such analytics had its roots in Tversky and Kahneman’s theories.

“I’d set out to tell a story about the way markets worked, or failed to work, especially when they were valuing people,” writes Lewis. “But buried somewhere inside it was another story, one that I’d left unexplored and untold, about the way the human mind worked, or failed to work, when it was forming judgements and making decisions.”

Tversky and Kahneman’s principles included “representativeness”, in which humans strive to see cause and effect, when in reality there is just uncertainty or randomness. Their pinpointing of our tendency to remember, incorrectly, our own predictions as being correct helped develop “hindsight bias” – a plea, perhaps, to give our lives order and meaning. Most importantly, they asked: “... when faced with uncertainty – about investments or people or anything else – how did [the mind] arrive at its conclusions?”

Kahneman’s big break came at the age of 21 when he found himself serving as the sole psychologist to the Israeli army – he had immigrated to Jerusalem at the end of the war with his mother. The young graduate was tasked with deciding how best to interview officers to find out who would succeed in what roles.

Kahneman was aware of the halo effect. When appraising others, there is a human tendency to see one positive trait, physical prowess for example, seep into other traits, such as leadership skill, with no evidence that the first backs up the second.

Eager to avoid this trap, he devised a series of questions that measured not just intelligence or education but actual behaviour. Known informally as the “Kahneman score”, it helped produce superior officers, shaping the Israeli military into one of the most effective and devastating armies in the globe. Kahneman’s impact cannot be understated – his score is still used today.

While Kahneman was shy, retiring and riven by self-doubt – he was so bad at sport he was known at school as “the Living Corpse” – Tversky was fearless and filled with a brash, bravura intelligence. He also served in the military and was commended for bravery after saving a wounded soldier in the battlefield.

People remember Tversky for his utter refusal to play by social norms. If he didn’t like a movie, he’d simply walk out – “They’ve already taken my money. Should I give them my time, too?” When he went for a run, he sprinted in just his underpants. As one friend remarked: “Amos thought people paid an enormous price to avoid mild embarrassment, and he himself decided very early on it was not worth it.”

Such opposing personalities helped pave the way for a fruitful, innovative partnership: one filled the gaps of the other. Their ideas were so closely interwoven that they used just one typewriter. When trying to decide who took the lead authorship on their very first paper, they flipped a coin. Kahneman would say later simply: “We were sharing a mind.”

Like all great collaborations the friendship seemed bound to fracture. After both moved to the United States – Tversky to take a position at Stanford, Kahneman at the less prestigious University of British Columbia – jealousies and frustrations began to surface. At one point Kahneman disowned his friend only to receive a phone call saying Tversky had cancer. Just months later, in 1996, Tversky died at the age of 59.

With his pleasure in relaying the small telling details, Lewis provides not only a portrait of two complex characters but that of the birth of Israel, too. Most importantly he succeeds in showing us why Tversky and Kahneman matter, and the roll-on effect their work has had, from medicine to the military.

As a young academic in Israel, Tversky was courted by those in power – the generals, the politicians. They suspected that intellectuals were key “to the survival of the Jewish state”. Lewis shows, in fact, these two extraordinary psychologists had relevance not just for one nation but for us all. EA

Allen Lane, 368pp, $45

This article was first published in the print edition of The Saturday Paper on
Dec 17, 2016 as "Michael Lewis, The Undoing Project".
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